Fix flood insurance

Sunday

Mar 2, 2014 at 12:01 AM

Reform of the National Flood Insurance Program has become the latest platform for bipartisan cooperation in the U.S. House.

It's no surprise. If ongoing negotiations are successful, the benefits of the resulting legislation would extend to millions of American homeowners -- both Republicans and Democrats -- and to state and local economies.

Discussions between House members of both parties -- led by Majority Leader Eric Cantor, R-Va., and Minority Leader Nancy Pelosi, D-Calif. -- began in earnest last week after Speaker John Boehner delayed an expected vote on the legislation.

Negotiators on both sides emphasize that the talks involve only technical details in the bill, and Boehner said Wednesday that he hoped a vote would take place this week.

The proposed legislation is an effort to fix flaws in the Biggert-Waters Flood Reform Act of 2012, which had the well-intended purpose of reducing a $24 billion deficit in the federal program. The act calls for premiums for residential property and small businesses to rise to actuarially sound rates, eventually eliminating subsidies that make flood insurance more affordable.

While Biggert-Waters was approved by overwhelming majorities in Congress, it later became clear that the required increases will cause some rates to triple or quadruple -- or more -- in cost. It will impact many low- and middle-income residents in older, low-lying homes as well as the wealthy owners of beach-front property. In addition, the law requires home buyers to immediately pay so-called full-risk rates when flood-zone property changes hands.

Economic impacts

Biggert-Waters, which began to take effect last October, has already hurt real-estate sales in Florida and elsewhere and could inflict long-term economic damage.

Consequently, the law poses a political threat to both Republicans and Democrats in coastal states as well as regions along major rivers that are prone to flooding.

Hence the bipartisan effort to take corrective action before the November election.

The Senate has already passed a bill that would delay the effects of Biggert-Waters for four years. The House legislation takes the better approach of addressing the flaws in Biggert-Waters and slowing the impact while keeping some reforms in place.

• Address the program's insolvency through annual assessments of $25 on primary-home policies; second homes and businesses would be assessed about $250.

• Modify a provision that allows flood-insurance rates to increase 20 percent a year for five years -- until they reach the fair market rate. Under the proposed bill, rates would increase by an annual average of 15 percent in each of nine rate categories.

Democrats' concerns

The 15 percent average increase in the bill was a sticking point for some House Democrats, the New Orleans Times-Picayune reported Thursday.

"Since it's an average," said a Democratic staffer involved in the talks, " there could be people with no increase, or a very low increase, and then others with a much larger increase than 15 percent."

Democrats have proposed capping the annual increase at 18 percent.

Cantor and other Republican leaders are trying to address the Democrats' concerns because they desperately need their votes to pass the legislation.

Opposition from tea-party conservatives in the GOP ranks and from conservative groups like Heritage Action and the Club for Growth -- who see the flood-insurance program itself as fiscally irresponsible -- led House leadership to fast-track the bill.

But that maneuver requires two-thirds approval of the House -- an extremely high bar in the politically divided chamber.

If the bill does pass, compromise legislation would have to be negotiated with the Senate, passed in both chambers and then sent to the president for his signature.

That's a tall order, but Republican leaders in the House and Senate met a similar challenge recently in passing a bipartisan bill to raise the federal government's debt ceiling.

This time, the leadership is addressing an issue that directly affects millions of homeowners and business owners -- and their votes.

Those are strong incentives to get a bipartisan deal done and pass the needed reforms to the flood-insurance program.